March 3, 2005


San Jose faces $60-$80 million budget deficit in coming fiscal year

Larry Lisenbee guides city through difficult service cuts

Editor’s Note: The following is the 22nd article in an ongoing series about the city’s departments and appointed officials. Next: San Jose Retirement Director Ed Overton.

By Sheila Sanchez
Staff Writer

San Jose’s Budget Director Larry Lisenbee is the man who will help city officials close a $60- to $80 million-budget deficit during fiscal year 2005-06, which begins July 1.

San Jose’s Budget Director Larry Lisenbee will help city officials close a $60 million to $80 million-budget deficit during fiscal year 2005-06, which begins July 1. Photo by Sheila Sanchez

Last October, the 56-year-old Lisenbee was, unfortunately, the bearer of bad news when he gave San Jose City Council members a financial forecast revealing the grave shortfall. City officials will be required to close the economic gap by either cutting expenses or raising revenue.

“Balancing next year’s budget is going to be tough,” says Lisenbee from his fourth floor office at City Hall. “It’s a lot of money and every service we provide is important to somebody.”

With limited ways to bring money into the city—either imposing a new tax requiring a vote by the people or imposing higher fees, which are already at their maximum level—Lisenbee explains the shortfall will have to be closed by cutting municipal services.

Cutting budgets
Every city department is developing proposals to cut their budgets by 20 percent, except police and fire departments, which have been asked to cut their budgets by 10 percent.

Lisenbee’s office, under the direction of San Jose City Manager Del Borgsdorf, will put together the budget cut plans and bring them to the council for review May 1.

“We’re talking about making huge, drastic cuts,” he says, adding that San Jose residents will unfortunately see reductions in parks and recreation services, less library hours, cuts in police and fire services, potentially even closing some fire companies, less street maintenance, tree trimming and basic infrastructure maintenance.

What caused the deficit? Lisenbee says the cost of city operations has grown faster than its revenues. He explains that when the dot.com boom ended at the beginning of 2001, the city’s sales tax—the largest revenue source in the city’s general fund— dropped by $30 million in two years. At one point, it dropped for 10 straight quarters.

During fiscal year 2004-05, sales tax receipts are expected to reach $128 million, below the peak of $169 million during fiscal year 2000-01.

He also says health care costs have increased 15 percent and the city’s retirement costs have skyrocketed.

“Our expenses are going up faster than our revenue,” he says. “If we don’t make changes now, our expenses will continue to outpace revenue through 2009.

“The deficits we face seem to get larger every year, particularly after the Silicon Valley economy went into the tank three years ago.”

Budget process
Under the city’s form of government, Lisenbee, who reports to Borgsdorf, must prepare a proposed budget for the coming fiscal year for the $2.5 billion worth of services that the city provides.

Pointing to last year’s 2004-05 adopted $2.7 billion budget, contained in a 10-inch thick two-volume document, Lisenbee explains the city’s operating and capital budgets are traditionally published and presented to the council on May 1.

This fiscal year’s budget was lower than the 2003-04 fiscal year budget of $2.9 billion. Like many organizations, the city has been facing significant financial challenges as a result of the continuing steep economic decline.

Lisenbee is proud to announce that the city has a nationally recognized performance-based budgeting program that helps San Jose develop a balanced budget while preserving city services.

Spending authority
After the council reviews the budget during May and June, it adopts a final budget on July 1, when the legal authority to spend is set by the city council.

After July 1, Lisenbee monitors city revenue collections and expenditures compared to the approved budget and makes sure it’s followed, reporting discrepancies to the council when needed.

He also prepares a monthly financial report for the council on city revenue collections and expenditures and highlights unanticipated trends and potential problem areas. He creates a mid-year budget review on city finances and at the end of the fiscal year he again provides a financial report for the council.

“We’re always doing three things in my office. We’re looking forward to next year, monitoring the current year and finishing up the report card on how the year ended,” he says.

He also publishes a five-year economic forecast so the council can understand its budget decisions with the future in mind.

On a daily basis, however, Lisenbee’s signature and expert financial opinion appears on almost every city proposal and issue considered by the council. “There are very few weeks when I don’t have at least one or two items on the council agenda that involve us bringing in some adjustment to the budget,” Lisenbee says.

With a staff of 17 people, he says it’s not difficult to make solid budgetary calculations and understand revenue sources and expenditures patterns. “It doesn’t involve higher math as much as it involves attention to detail and an ability to carefully make sure that you quadruple check all your estimations to avoid mistakes,” he says.

Budget overruns
One of the city’s biggest budget endeavors during the last several years has been the ambitious high-rise City Hall being erected above east Santa Clara Street.

San Jose’s Budget Director Larry Lisenbee has been drafting the city’s economic plans for nearly 20 years. He explains last year’s 2004-05 adopted $2.7 billion budget, contained in a 10-inch thick two-volume document. Photo by Sheila Sanchez

Government watchdogs have recently criticized the city for going over budget on the project, originally estimated to cost the city $343 million, which including the construction of an employee garage, now carries a price tag of $345.7 million.

Lisenbee blames the project’s $2.7 million overrun to a lawsuit filed against the city by the non-profit Preservation Action Council of San Jose alleging one of the buildings that would have to be razed is a historic landmark. A judge dismissed the suit last month. City employees, however, will be faced with limited parking spaces when they move into the building sometime at the end of the summer while it takes about nine months to complete the garage.

Additional costs for the building’s furniture and technology, he says, are on track, explaining $45.2 million was set aside for those commodities early on. But these items are not included in the building’s new price tag of $345.7 million. The money was borrowed by the city from several banks through a commercial paper program, similar to a household line of credit program.

He says the only significant problem with the furniture and technology outfitting of the building was the improper award of an $8 million contract to install Cisco Systems equipment for the facility’s computer-and-phone network.

The council will consider a new bid award March 15. The delay caused by the need to re-bid the project should not cost taxpayers additional money, he says, contrary to San Jose Mercury News reports, which indicate a $3 million potential cost impact.

“I’ve got no reason to believe this will go over,” Lisenbee says, confidently.

He says anytime a government agency builds such a big project, it’s normal to be under and over budget, adding that the high cost of concrete and steel worldwide has also affected the building’s cost. “We’re still five, six months away from completion, but there’s a long way to go before we’ll know the final story.”

Career change
Lisenbee, an avid golfer and a father of three, does not have a formal education in numbers and complicated math equations. He earned a bachelor’s degree in health science from San Jose State University and a master’s degree in public health from the University of California-Los Angeles.

After studying to become a health scientist, and serving as a Santa Clara County health educator for a few years Lisenbee realized he was really more interested in public business and budget issues than in health issues. He went on to work in various positions in the Santa Clara County budget office from 1978 to 1986, and San Jose hired him as budget director in November of 1986.

“It was a complete career change. I didn’t realize the process of budgeting was so fascinating until I got into the public sector,” he says. “It’s the most challenging and satisfying part of running the city. It’s making decisions about how to spend public resources. There’s only so many dollars and the process of deciding how to spend those and what the priorities are, is to me one of the most important things government does, particularly during tough economic times.

“I don’t think there’s anybody in the city that knows San Jose’s finances better than I do,” Lisenbee says.

For more information on San Jose’s Budget Office, visit 801 N. First St., room 436, San Jose, Calif., 95110, call (408) 277-5777 or log onto www.sanoseca.gov/budget.